Fraud Victims Paid $13M for Worthless Boxes

PHOENIX — The computer components came in sealed boxes: a semiconductor called silicon germanium that only could be opened in laboratory conditions. They were shipped to U.S. distributors who agreed to serve as middlemen in a transaction between a Chinese supplier and a Canadian receiver.

Distributors invested heavily. For four years, more than a dozen people in Arizona and several other states paid $13 million to facilitate the transactions. Then the deal unraveled.

The Canadian receiver was fictional. Business phone numbers were fakes. Shipping invoices were forgeries. And those hermetically sealed crates and packages? Worthless. Stuffed with packing materials and nothing else.

It was all part of an elaborate advance-fee scheme, a con game in which victims are duped into paying up front for business opportunities or investments that never materialize.

It’s a variation on the Nigerian-letter scheme, the one where some fake official wants your help in smuggling millions out of the country. Only in this case, the mastermind was a Nigerian national living in Canada, according to federal court documents.

Alex Sualim admitted his part in the semiconductor scheme and laid out details of the international con game as part of a plea deal last month with the Arizona U.S. Attorney’s Office.

“Potential victims wouldn’t be asked for money during these early communications. Instead, they’d be offered an opportunity to serve as a distributor without any upfront investment,” Sualim said in the plea agreement. “Over time, the story would change. Victims would eventually be told that, due to unforeseen financing problems, they would need to supply a portion of the upfront purchase price.”

Sualim said victims were initially contacted in unsolicited e-mails from men and women claiming to represent a Canadian company that was looking to buy silicon germanium from China. To give the deal legitimacy, victims were sent electronic documents and passports in the names of the fake Canadians.

“Potential victims wouldn’t be asked for money during these early communications. Instead, they’d be offered an opportunity to serve as a distributor without any upfront investment.”

Alex Sualim, in his plea agreement

But then came the financing problems. Victims were told they needed to wire part of the purchase price to the Chinese supplier through foreign banks in Cyprus, Greece and China.

“After victims made an initial transfer into the foreign bank account, they’d be told that, due to some unforeseen change in circumstances … they actually needed to wire more money before the transaction could be completed.”

Victims who got suspicious received packages and crates with instructions not to open them outside of a laboratory. And they continued to pay, Sualim said in the plea agreement.

Silicon germanium is real. It is used as a semiconductor material for microchips and creates high-frequency circuits. But that’s not what Sualim’s victims were getting.

Sualim told authorities that he bought e-mail lists used to target victims from a vendor in Vietnam; he set up the fake toll-free phone numbers and helped create websites for the fake Chinese and Canadian companies; he used “spoof” cards and bogus e-mail accounts to fool victims into believing they were corresponding with representatives in multiple countries; and he helped develop scripts to lure victims.

He also moved the money.

“I worked with a money-laundering expert to route the proceeds through a web of foreign bank accounts and through a family-owned bakery in Nigeria,” Sualim said in the plea agreement.

The scheme ran from 2009 to 2013, when Sualim was arrested in Las Vegas after an investigation by the the FBI and IRS.

Court documents outline how victims were subjected to an escalating series of demands to secure shipments of products for which they already had paid.

An Arizona victim, identified in court documents only by initials, told authorities how the scheme unraveled in 2011 after he and two others paid more than $2.6 million.

Authorities said the victim agreed to purchase silicon germanium in wafer form and resell it to a Canadian company called Agmine International Limited, which would melt the wafers to extract the product.

According to court records, the victim wired $310,000 to a Chinese supplier called AEG Global Contracting Limited for 61 units of the semiconductor. An AEG representative contacted him shortly thereafter and told the victim that a new company had acquired AEG and instituted a minimum purchase requirement of 500 units.

The victim negotiated the minimum purchase order down to 250 units total. He wired an additional $315,000 and about two months later received a crate that could only be opened in a “clean room.”

That’s when authorities said an Agmine superviser contacted the victim. He told the victim that the Canadian company also had upped its purchase requirements to 400 units. The victim agreed to pool his resources with two other victims and over the next three months paid $2 million for the product.

The product arrived and the Agmine superviser agreed to send a truck for the product, authorities said. But the superviser advised that the company had increased its minimum to 800 units and required another purchase.

According to court documents, the investor balked and Agmine cut off communications. The investor then opened the packages and discovered compact discs wrapped in plastic.

Sualim was initially charged with conspiracy and 21 counts of fraud. He was released on bond in January 2014 and ordered to wear an electronic monitoring bracelet and remain in Maricopa County.

In a motion last year, Sualim argued that the court should bar any reference to his nationality because it is prejudicial and would appeal to racial bias of potential jurors. He said the media portrays Nigerians “as scammers and con artists.”

He argued the court should refer to him as a citizen of “Country X.”

Federal prosecutors said Nigeria was a key element in the fraud. They said all of the money stolen from victims was converted to Nigerian currency. They said Sualim routed the money through his brother’s bank accounts and his family business in Nigeria and then transferred it to his own accounts in Canada.

Prosecutors said Sualim and another person operating the e-mail accounts and were members of a Canadian/Nigerian social organization called the Ibusa Association Ontario and both claimed to be founders of a Nigerian news website.

In exchange for Sualim’s guilty plea, authorities dropped all but the conspiracy charge and agreed to a maximum prison term of 12.5 years.

Sualim is required to liquidate at least 18 U.S. and Canadian bank accounts, a brokerage account, five homes in Canada and seven vehicles, including a 2013 Tesla and a Porsche Panamera to pay restitution to his victims.

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